Rise of the Chinese enterprise
as employer of choice
by Marie Han Silloway, Steve Fisher, and Steve Jiang
June 2011
Chinese firms are luring
talented managers and
executives away from
multinational corporations
by offering generous
compensation, more
decision-making power,
and a faster career track.
MNCs will need to respond
with smart recruiting and
retention strategies to
maintain any edge in this
competitive market.
China’s economic growth is unprecedented. Its
GDP is expected to more than double between
2010 and 2020 while its current 13 percent
share of global GDP could balloon to 30
percent in that decade. The International
Monetary Fund recently forecast that, in terms
of purchasing power parity (PPP), China could
surpass the United States as soon as 2016.
China’s middle class is, by some calculations,
already 300 million people and rising.
For years, multinational corporations (MNCs) have viewed this
scenario as an opportunity for their own growth, and have moved
aggressively to compete for market share and brand loyalty. What
they seem not to have anticipated is that Chinese companies
might poach their critical managerial talent.
“I recently lost an employee who went to a Chinese enterprise for
four times the pay,” reported the head of talent recruitment in
greater China for a global food and beverage company. “And there
is no way we would ever match that.”
MNCs cannot compete effectively without brainpower. So is their
position in China threatened? Are we entering a new era in which
the Chinese enterprise is the preferred career choice for
executives?
 The allure of Chinese enterprises
China’s potential might seem infinite, but the pool of business talent
engineering this boom is not; heating up competition for experienced
managers and executives. MNCs traditionally held the upper hand in
recruiting top talent, but a new trend is emerging: Chinese enterprises
are becoming more attractive to white-collar Chinese professionals, as
well as expats steeped in the market.

For Chinese professionals, joining an MNC has long been viewed as an

attractive opportunity for improved social and career mobility. MNCs
offered competitive salaries, handsome
MNCs traditionally held the upper hand in benefits, business training, and the
possibility of an overseas assignment.
recruiting top talent, but Chinese enterprises
Few ambitious professionals would
are becoming more attractive to white-collar forgo those perks to work for a Chinese
Chinese professionals and expats. enterprise. Now, with the number of
private Chinese employers expanding
and offering similar benefits, fresh graduates and senior executives alike
view Chinese enterprises as a legitimate—even preferable—career
option.

Foreign executives are also getting into the act—especially since the
global recession, with China’s economy emerging relatively unscathed.
Korn/Ferry International’s executive recruiters reported a significant rise
in interest in joining Chinese enterprises among foreign top-level
executives. In addition, our consultants are more frequently being asked
to fill vacancies created when senior executives depart for a Chinese
enterprise.

Indeed, there have been several high-profile moves in the last few years.
David Wei from B&Q joined Chinese e-business Alibaba in 2006, and in
2004 Jun Tang (former president of Microsoft China) left to head online
gaming operator Shanda Interactive Entertainment before joining New
Huadu Group as president and CEO.

Noting this shift in attitude, we surveyed more than 40 senior executives

working in China across a range of industries, and in March 2011,
brought some of them together to discuss the findings (see Figure 1).
About a dozen people at the event shed light on the new appeal of
Chinese enterprises and whether this would last.

During the forum, we found that almost a fifth of the participants had
left an MNC in 2010 to join a Chinese enterprise. While not a startling
number in light of the small group size, it confirmed the growing trend
in the country. Why are some executives leaving MNCs for Chinese
enterprises? Is this trend likely to be permanent? What preemptive
actions might MNCs consider to safeguard their talent?

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Figure 1
Factors that would entice executives to join a Chinese enterprise
Korn/Ferry surveyed 43 executives and managers working in China on the factors most important to them.

45%

40% Most important factor

35% 2nd most important factor

30%
3rd most important factor

25%

20%

15%

10%

5%

0% *Sense of achievement in helping

the Chinese enterprise go global,
making a personal impact on the
company, stock options, etc.

Myriad factors influence the decision to move from an MNC to a Chinese

enterprise. Participants at the forum settled on four principal
determinants: financial upside, career momentum, empowerment, and
security.

Financial upside. Gone are the days when receiving a good salary from a
prestigious MNC was enough to motivate an ambitious manager in
China. Today, smaller local enterprises with the potential for rapid
growth in scale and profitability in China’s vast market offer not only a
generous salary but also the financial gain from a possible IPO—a gain
that has made many people millionaires overnight. This was a powerful
draw, we found. In fact, 45 percent of the senior managers we polled
said they would consider joining a pre-IPO Chinese enterprise, and 30
percent a publicly-traded Chinese enterprise.

In addition, executives don’t see much long-term career risk if the move
doesn’t work out. “I switched companies [from an MNC to a Chinese
enterprise] thinking I could potentially retire at an early age,” said one
manager from an international food group. “When the company failed
to go public, I was disappointed not to be very rich, but I knew I could go
back to my old job.” MNCs are simply unable to match such incentives.

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 Career momentum. MNCs generally adhere to globally standardized
grading scales resulting in a slow and controlled career growth. This is
regarded as too slow for some, especially as Western firms retrenched
during the global recession.

Conversely, the common belief is that managers at Chinese companies

tend to be promoted quickly. As one senior human resources manager
from an international beverage company observed: “There is a lack of
patience. Local enterprises have lost their patience in growing their own
talent and they are willing to pay for (outside) talent. So they offer
senior, flexible titles to encourage executives to come on board since
most MNCs cannot offer these. On the other side, good talent are losing
their patience with MNCs because they see friends making a lot of
money by either running their own business or leaving the corporate
world to join small enterprises. So they want immediate returns in the
form of either money or title.”

To compensate, some MNCs have found a way to commit to both the

company’s global scaling as well as the local demands by making a small
adjustment: creating additional titles for use in China that are outside of
the global ranking scale. In truth, none of the participants at our forum
cared if a person on their team had a special, custom title, so long as he
or she was committed to the company targets.

Empowerment. Another oft-cited reason for shifting to a Chinese

enterprise is the enhanced freedom in decision-making. One manager at
a global fashion retail company compares joining a local company to
“starting your own company and satisfying a dream or ambition, but
without having to sink in your own capital.” Since Chinese enterprises
tend not to be burdened by the same structures, processes, or formal
chains-of-command found in MNCs, managers are encouraged to
innovate and implement new ideas quickly. The current head of
recruiting at a global industrial firm said, “China is like the new global
headquarters. Which manager does not want to be tied to the center of
true decision-making?”

Security. Chinese enterprises are perceived to offer greater security and

loyalty to their employees. Executives here echo what the Harvard
Business Review wrote in March 2011 about the battle for China’s talent:
“Foreign companies are in retrenchment mode. Even in this fast-
growing market [China], multinationals surveyed were more likely to
cite ‘reducing operational costs’ as their top business priority. That
means lower salaries and smaller bonuses.”

However, some participants argued that so much of the positive

sentiment about Chinese employers could be attributed to the global
economic slowdown that this could turn out to be temporary.

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Will they stay?
Not all high-level appointees who moved to a Chinese enterprise remained
there for the long-term. There is no firm research available yet, but
Korn/Ferry consultants estimate that 15 to 20 percent of managers who join
a Chinese enterprise leave before eighteen months. Within the group of
executives that we polled, many of the managers who moved to a Chinese
enterprise returned to an MNC. “The feedback [about moving to a Chinese
enterprise from an MNC] is mixed. It is very difficult to draw a conclusion at
this moment,” said the head of one global industrial firm.

The survey results and the subsequent discussion at the forum showed that
talent retention at Chinese enterprises is hindered by three principal factors:

Cultural differences. The nature of these will vary widely, but cultural
differences are almost always a source of tension for senior managers who
move from an MNC to a Chinese enterprise. While the processes and systems
in MNCs may be frustrating at times, they do offer desirable structure and
quality control, and more frequently than not, a structured path to growth
within the company. Contrast this with the entrepreneurial environment
often found at Chinese enterprises, where strategic decisions and changes
may be more ad hoc, with little transparency. Such an environment can
often feel chaotic to senior managers with an MNC background. At the
forum, a manager at a Chinese enterprise shared that its corporate culture
made him feel cut off from “global best practices.” In fact, over 65 percent of
the people polled said cultural differences would be the main reason to leave
a company (see Figure 2).

Figure 2
Factors that would influence executives to leave a Chinese enterprise

70%

60%
Most important factor
50% 2nd most important factor
3rd most important factor
40%

30%

20%

10%

0%
*Undelivered promises, etc.

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 Communication. Since their growth has usually been quick, Chinese
companies’ internal communication processes frequently aren’t fully
developed. Forum participants further pointed out that local managers
are, understandably, transaction-focused as a rule and not strong
executive communicators. This frustrates executives; if the strategic
direction is unclear, it’s difficult for them to perform.

A general manager from a banking services firm also found it hard to

find an ear open to his own ideas, and suggested that the only way to
share thoughts with the boss was to be one
Internal communication can be an extremely of the few invited to play golf with him.
Internal communication can be an
effective tool for an MNC to demonstrate its extremely effective tool for an MNC to
commitment to its staff and the Chinese demonstrate its commitment to its staff
market. and the Chinese market. This in turn can
improve the company’s brand and value
proposition by creating employee-ambassadors in the market.

Unrealized promises. Chinese enterprises, seemingly rich with cash and

promises, present a tantalizing prospect for managers. However, some
have found that promises are not necessarily kept. Expectations of
extravagant pay are often misguided; the “jackpot” of an IPO
materializes only for a few. One senior recruiter left her role with an
MNC to join a pre-IPO Chinese enterprise that dangled generous stock
options—only to discover that the company was almost bankrupt and
shortly thereafter was dissolved. She was also surprised to find that her
job description differed greatly from what she was asked to do in
practice, and that “informal chains of command bypassed her.”
Disappointed, she returned to a MNC and has no intention of joining
another Chinese enterprise.

Dealing with threats to retention

As Chinese enterprises become true career alternatives, they continue to
hire broader types of talent, particularly executives with international or
multinational expertise. MNCs may still have an edge, which could
sharpen with economic recovery and new hiring, but should consider
revisiting their recruitment and retention strategies in view of the
increased competition.

Some MNCs have developed creative ways to retain talent. For example,
the head of human resources for a beverage MNC acknowledged that she
collects and shares anecdotes about people who were unhappy with a
move to a Chinese enterprise.

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We asked the senior managers participating in the forum to share innovative
strategies they had considered or implemented. While the suggestions were
plentiful, we found the three below to be most relevant across industries:

Stretch your high-potential talent. Don’t be afraid to give your talent stretch
assignments instead of waiting until they are ready. One of the major drivers
of joining a Chinese enterprise is the ability to hold jobs with greater
responsibilities and influence. The Chinese enterprises don’t hesitate to
challenge their talent and let them learn by doing.

Adjust salary and compensation bands. One size does not fit all in China.
Chinese enterprises often edge out MNCs in their ability to put together
creative compensation packages. They are flexible on pay scales; a new hire
doesn’t necessarily have to fit into any particular salary range. They are
flexible on titles as well, which can be very meaningful to executives here.

Polish your own employment brand proposition. Demonstrating long-term

commitment to continuous growth and the Chinese market would help
stem any fear of job-cuts post-recession. Inculcating a strong belief in the
company’s vision, demonstrating a strategic interest in the development of
managers, and portraying a leading corporate culture may be the difference
between fight and flight for a company’s top talent.

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 Marie Han Silloway is a Senior Client Partner and Managing Director of
Korn/Ferry International’s Asia Pacific Consumer Market. Based in
Shanghai, she can be reached at marie.silloway@kornferry.com

Steve Fisher is a Senior Client Partner and Head of Korn/Ferry

International’s Industrial Market for China. Based in Shanghai, he can be
reached at steve.fisher@kornferry.com.

Steve Jiang is a Senior Client Partner with Korn/Ferry International’s

Global Industrial Market. Based in Shanghai, he can be reached at
steve.jiang@kornferry.com.

About the Korn/Ferry Institute

The Korn/Ferry Institute generates forward-thinking research and
viewpoints that illuminate how talent advances business strategy. Since
its founding in 2008, the institute has published scores of articles, studies
and books that explore global best practices in organizational leadership
and human capital development.

About Korn/Ferry International Asia Pacific

Korn/Ferry International, with a presence throughout the Americas, Asia
Pacific, Europe, the Middle East, and Africa, is a premier global provider
of talent management solutions. Korn/Ferry was the first major global
executive search firm to operate in Asia Pacific when it opened its doors
in Tokyo in 1973 and today has 18 offices in key business centers
throughout the region. Based in Los Angeles, the firm delivers an array of
solutions that help clients to attract, deploy, develop and reward their
talent.

Visit www.kornferryasia.com for more information on the Korn/Ferry

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8 © 2011 The Korn/Ferry Institute